ATS Q4 2026 Earnings Report

ATS EPS Results

• Actual EPS: $0.26
• Consensus EPS: $0.32
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: N/A

ATS Revenue Results

• Actual Revenue: $535.09 million
• Expected Revenue: $529.43 million
• Beat/Miss: Beat by +$5.66 million
• YoY Revenue Growth: N/A

ATS Announcement Details

• Quarter: Q4 2026
• Date: 5/28/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 28, 2026
• Conference Call Time: 8:30AM ET

ATS (NYSE:ATS) (NYSE: ATS) is a Canadian automation and technology company that designs, builds and services customized manufacturing systems. The company helps manufacturers automate production, assembly, testing, inspection, packaging and material-handling processes, with solutions tailored to complex and high-volume applications.

ATS serves a range of industries, including life sciences, pharmaceuticals, medical devices, transportation, electric vehicles, energy, consumer products and industrial manufacturing. Its offerings include automated production lines, precision assembly equipment, packaging and processing systems, inspection and testing technologies, and aftermarket services such as system upgrades, maintenance and technical support.

Founded in 1978 and headquartered in Cambridge, Ontario, ATS operates internationally through engineering, manufacturing and service locations in North America, Europe and Asia. The company has expanded through organic development and acquisitions, combining automation expertise with specialized technologies used in regulated and advanced manufacturing environments.

ATS Q4 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: ATS said fiscal 2026 revenue and adjusted earnings from operations both grew about 11% for the full year, reflecting solid execution across the platform. Q4 adjusted revenue also rose 3.2% year over year despite a tougher bookings comparison.
• Neutral Sentiment: The company is repositioning its transportation operations, including moving away from large-scale automotive projects and consolidating divisions. Management said this will remove about CAD 50 million of dilutive revenue and should improve margin and capital efficiency over time.
• Positive Sentiment: ATS ended fiscal 2026 with about CAD 2 billion in backlog, with life sciences making up 55% of the total and energy backlog up roughly 40% year over year. Management said this provides good revenue visibility heading into fiscal 2027.
• Neutral Sentiment: For fiscal 2027, ATS expects modest revenue growth and 50-75 basis points of margin improvement, supported by restructuring, services integration, and operating discipline. The company also noted that growth timing is being affected by normalization in some life sciences programs, especially GLP-1-related work.
• Positive Sentiment: Cash generation and balance sheet metrics improved meaningfully, with operating cash flow of CAD 150 million, working capital at 12.1% of revenue, and net debt to EBITDA at 2.8x. Management said leverage and working capital are now within target ranges, giving the company more flexibility for capital deployment and M&A.

Presentation

[David Ocampo, Head of Investor Relations at ATS Corporation]

Thank you, operator. Good morning, everyone. On the call today are Doug Wright, Chief Executive Officer, and Anne Cybulski, Interim Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements, are detailed in slide three of the slide deck. It's my pleasure to turn the call over to Doug.

[Doug Wright, CEO at ATS Corporation]

Thank you, David, and good morning, everyone. Today, ATS reported fourth quarter and annual results for fiscal 2026. For the full year, revenue and adjusted earnings from operations grew by approximately 11%, reflecting solid execution across the platform as our teams delivered innovative solutions to our global customer base. Since I joined in January, I've spent time with our business leaders and teams, which has continued to sharpen my conviction about what makes ATS distinctive. Regardless of the end market, what consistently stands out is how focused our people are on our customers and how genuinely committed they are to innovating so that our businesses excel. This starts with our ability to engineer and deliver in markets of consequence, where the depth of our expertise and the precision of our execution are what customers depend on.

[Doug Wright, CEO at ATS Corporation]

A good example is how we're evolving our digital twin offering, moving beyond individual project execution to support customers on a continuous basis. My priority now is translating these capabilities into stronger financial performance. We see a clear path to margin improvement and free cash flow generation through disciplined execution, a greater mix of aftermarket revenue, sharper commercial acumen, innovation, and improved utilization of our asset base. Consistent with these priorities, we are taking several actions to better position the portfolio. Our businesses previously involved in transportation are being consolidated, and we are refocusing their capacity to other areas. In particular, we are moving away from large-scale automotive projects and repositioning the related capabilities into specialized applications where our differentiation creates greater value and the return profile is more attractive.

[Doug Wright, CEO at ATS Corporation]

As an example, we are partnering with a customer on novel technology to break down end-of-life tires and recover reusable byproducts, bringing our engineering expertise, digital tools, and lifecycle support to address a complex environmental challenge. We've also advanced the integration of our aftermarket businesses directly into our operating units. This gives each business ownership of the full equipment lifecycle and is a key lever in improving both margins and the predictability of our revenue. Across the business, we continue to evaluate our portfolio based on strategic focus areas and market dynamics. Any further actions will be aligned to our goals of continuing to grow the business with improved margin performance and cash flow efficiency. Now shifting over to the results and outlook.

[Doug Wright, CEO at ATS Corporation]

Q4 adjusted revenues were up more than 3% versus last year, while order bookings were down 18%, reflecting the presence of several large enterprise orders in the prior period. Of note, excluding transportation, our three-year CAGR on adjusted revenues and order bookings is approximately 12%. This performance again reinforces to me the strength of our chosen markets and the opportunity available to us over the longer term as we execute on our plans going forward. On profitability, Q4 adjusted earnings from operations were in line with our expectations, driven by execution against our backlog. Turning to outlook. We ended fiscal 2026 with an order backlog of approximately CAD 2 billion, providing good revenue visibility. In life sciences, demand remains strong, with a healthy backlog and a diversified funnel against a range of applications.

[Doug Wright, CEO at ATS Corporation]

Our radiopharma business continues to build momentum and remains a key growth driver, supported by growing customer investment across the value chain. Demand is driven by the expanding use of targeted therapies as adoption broadens across treatment settings and cancer types. As isotope supply and production capacity expand, customers increasingly require specialized infrastructure to support complex, high-value programs at scale. As an example of our ability to innovate to meet this demand, we recently introduced FLEXLINE, our sterile pharmaceutical production platform, which integrates key manufacturing steps into a single solution to help customers accelerate market entry and reduce process complexity. Entering fiscal 2027, our life sciences funnel is broader, extending beyond any single program type into areas such as mail order pharmacy, automated visual inspection, and lab automation.

[Doug Wright, CEO at ATS Corporation]

On GLP-1 auto-injector equipment, we remain engaged on active programs and to continue to support customers as production requirements and delivery formats evolve. In food and beverage, we have a strong funnel across our core processing markets, including tomato and fresh fruit applications. We are focused on expanding into adjacent packaging and produce categories, broadening the revenue base, and building resilience against the timing of customer capital spending. In energy, backlog increased approximately 40% year-on-year, driven particularly by nuclear, including refurbishment, life extension, and new build programs. The pipeline is strong and diversified across program stages and reactor technologies. Our work on nuclear refurbishment and life extension programs continues to progress, with service opportunities expected to build as these programs advance.

[Doug Wright, CEO at ATS Corporation]

Alongside this pace, we remain actively engaged with several small modular reactor developers across fuel systems, fuel handling, modular fabrication, and waste management. Within consumer products, we continue to see orders across warehouse automation and packaging applications. Funnel activity remains stable, supported by customers' ongoing focus on automation, efficiency, and fulfillment capabilities. On capital allocation, with leverage now within our target range, our near-term focus is on deploying capital within our framework. As our financial flexibility increases, we expect to have the capacity to pursue larger transactions. We have a funnel in our chosen end markets, and we are in position to act with conviction when the right opportunity arises. In evaluating potential acquisitions, we first focus on the industrial logic.

[Doug Wright, CEO at ATS Corporation]

In particular, we look for businesses that can enhance our margin profile, positively affect our aftermarket and service mix, and where relevant, strengthen our technical capabilities in the markets we serve. This also includes considering how an opportunity may allow us to apply our engineering and automation expertise across adjacent applications and improve performance through disciplined execution. Our objective is to deploy capital toward opportunities that enhance long-term cash generation and support disciplined, sustainable value creation for our shareholders. In summary, we enter fiscal 2027 with strong positions in our core end markets and a clear strategic focus. I'm encouraged by the alignment and accountability across the organization and by the strength of our business leaders. We begin fiscal 2027 with a solid backlog and good funnel visibility.

[Doug Wright, CEO at ATS Corporation]

With the actions taken and underway, ATS is a more focused company, and we are positioned to translate that into higher margins, stronger cash generation, and long-term value creation. Now, I will turn the call over to Anne for her financial report. Anne, over to you.

[Anne Cybulski, Interim CFO at ATS Corporation]

Thank you, Doug. Good morning, everyone. Before reviewing our results, I'll address the reorganization activities that we disclosed today. After a thorough review of current and expected market conditions, and given our sharp focus on capital efficiency and margin expansion, we decided to reposition our transportation operations, which includes consolidating divisions and rationalizing our operational footprint. These changes are aligned with our margin expansion focus in fiscal 2027 while removing dilutive revenues of approximately CAD 50 million. Our approach allows us to retain unique capabilities, technologies, and domain expertise and redeploy them into more attractive niche industrial applications. As a result, I expect that in the coming quarters, we will no longer report transportation as a separate market vertical.

[Anne Cybulski, Interim CFO at ATS Corporation]

In the fourth quarter of fiscal 2026, we recorded CAD 28.3 million of costs related to these reorganization activities, primarily from closing out legacy projects. We expect restructuring charges of approximately CAD 5 million in the first quarter as we complete the operational consolidation. During fiscal 2027, we also expect to finalize the sale of three facilities currently held for sale and plan to use the proceeds to fund cash costs related to the reorganization activities. In the fourth quarter, we recorded CAD 9.8 million of costs related to our previously announced initiative to embed our services operations directly into our business units, including project closure costs and other related non-cash adjustments.

[Anne Cybulski, Interim CFO at ATS Corporation]

In addition to the Q1 costs of completing the transportation repositioning, we also expect CAD 5 million-CAD 10 million of restructuring costs in other areas of the business. Throughout fiscal 2027, as we continue to pragmatically assess our strategic positions and market potential across our portfolio, there will likely be further opportunities for rationalization. That said, the fundamentals of the business remain strong, and our teams are equipped with the tools they need to drive both operational excellence and disciplined strategic execution to support our performance expectations. With that context, I'll turn to our operating results for the quarter. Order bookings were CAD 704 million, down 18.4% compared to Q4 last year, which included large project awards in consumer products.

[Anne Cybulski, Interim CFO at ATS Corporation]

Our trailing 12-month book-to-bill ratio at the end of Q4 was 0.99 to 1, reflecting execution against a strong backlog as previously secured orders converted to revenues. Our funnel remains healthy across our chosen end markets. Adjusted revenues for the fourth quarter were CAD 744 million, up 3.2% compared to last year, including organic growth of 1.5%, along with a 1.7% benefit from foreign exchange translation. Of note, on a full year basis, organic growth was 6% and excluding transportation was nearly 14%, reflecting strong performance relative to the market. Moving to earnings, fourth quarter adjusted earnings from operations were CAD 76.8 million, a 3.4% increase from Q4 last year, primarily on higher adjusted revenues, partially offset by increased SG&A costs.

[Anne Cybulski, Interim CFO at ATS Corporation]

Gross margin for Q4 was 29.4% of adjusted revenues, a 36 basis point increase on Q4 last year, reflecting a higher contribution from higher margin services and spare parts. On SG&A, excluding adjusting items, expenses in the fourth quarter totaled CAD 139.5 million, a CAD 5.6 million increase over the prior year, mainly due to foreign exchange translation, along with higher professional fees. During the quarter, we incurred CAD 15.2 million of restructuring costs in addition to the transportation and services reorganization costs that I discussed earlier. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was CAD 2.4 million in Q4. Going forward, we expect the run rate to normalize to approximately CAD 5 million per quarter.

[Anne Cybulski, Interim CFO at ATS Corporation]

Adjusted earnings per share were CAD 0.36 for the quarter. Moving to our outlook. We ended the quarter with an order backlog of approximately CAD 2 billion, with life sciences at CAD 1.1 billion, or 55% of backlog. Energy was the year's strongest growth market, with order backlog up 40% versus Q4 last year. Our order backlog across food and beverage, energy, and life sciences, markets that tend to be more highly regulated, made up nearly 80% of the total order backlog heading into fiscal 2027. Based on the expected conversion of this order backlog and new orders booked and billed within the period, Q1 revenues are expected to be in the range of CAD 700 million-CAD 740 million.

[Anne Cybulski, Interim CFO at ATS Corporation]

As a reminder, this assessment is updated every quarter, taking into account revenue expectations from current order backlog and from new orders booked and billed within the quarter. For fiscal 2027, we expect modest revenue growth. Two things are worth calling out. As noted, Transportation revenues are expected to step down, reflecting our decision to move away from large-scale automotive work. Within Life Sciences, we enter fiscal 2027 with a more normalized backlog, having worked through our strong bookings from fiscal 2025. This does not reflect a change in the underlying Life Sciences demand picture or our expectations to outperform our chosen markets over time.

[Anne Cybulski, Interim CFO at ATS Corporation]

On adjusted earnings from operations margins, we expect to exit fiscal 2027 with 50-75 basis points of improvement over fiscal 2026 on a full-year basis, supported by our reorganization actions and continued operating discipline. This outlook includes the reinvestment of a portion of the related savings in targeted growth areas such as nuclear and radiopharma. As we execute on our plans, our path to margin expansion will not be linear. With the actions we are taking, along with disciplined execution of the ABM across the portfolio and focus on aftermarket services, we are confident in our path forward. Longer term, our adjusted earnings from operations margin target remains 15%.

[Anne Cybulski, Interim CFO at ATS Corporation]

The actions we have taken this past year, along with the priorities we outlined today, are deliberate steps on that path. Disciplined asset efficiency is central to that journey as we improve returns on invested capital and focus on delivering long-term shareholder value. While the macro environment remains fluid amid geopolitical and trade uncertainty, we can again confirm that previously announced tariffs have not had a material impact across our regions. Most exports from Canada to the U.S. continue to fall under USMCA coverage. With respect to revised Section 232 tariffs, the impact depends on specific customer programs and the nature of our work, and at this time is not expected to be significant. Our global decentralized operating model positions ATS to adapt effectively and support customers wherever capital is being invested.

[Anne Cybulski, Interim CFO at ATS Corporation]

Moving to the balance sheet. In Q4, cash flows from operating activities were CAD 150 million. Our non-cash working capital as a percentage of revenues was 12.1%, marking a third consecutive quarter of improvement. Sequential improvement from Q3 reflected the balance sheet impacts of the transportation reorganization, along with focused discipline on working capital. This ratio can be influenced by billing and collection activity around period ends, but the improvement is meaningful. We remain focused on driving efficient cash generation through disciplined working capital management processes and, more broadly, overall asset efficiency. During the quarter, we invested CAD 25.4 million in CapEx and intangible assets to support innovation and further strengthen our capabilities, bringing the full-year total to CAD 76.7 million.

[Anne Cybulski, Interim CFO at ATS Corporation]

For fiscal 2027, we expect our CapEx and intangible investment to be between CAD 70 million and CAD 90 million. On leverage, our net debt to adjusted EBITDA ratio ended Q4 at 2.8 times, reflecting continued progress and marking a fourth consecutive quarter of improvement. I'll remind you that in the event a capital deployment opportunity arises that aligns with our strict standards for shareholder value creation, we may temporarily operate above our range of 2-3 times. In such cases, we will ensure there is a well-defined path to return to our targeted range. In summary, fourth quarter results were in line with our expectations, supported by a strong order backlog and diversified end market exposure.

[Anne Cybulski, Interim CFO at ATS Corporation]

I am proud of and thankful to our global finance organization and our operations leaders and teams for their hard work and consistent execution across ATS during our leadership transition. Together, their efforts provide a stronger foundation and increased financial flexibility as we head into fiscal 2027. We made meaningful progress throughout the year, and in Doug's first quarter as CEO, we've achieved a lot. Both working capital and leverage are within our targeted levels. Our reorganization actions and operating priorities position us to deliver improving margins and stronger cash generation over time, supporting disciplined, long-term shareholder value creation. We will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

[Operator]

Thank you. Your first question comes from Michael Glen with Raymond James. Your line is open.

[Michael Glen, Managing Director at Raymond James]

Hey, good morning. Maybe just to start with, could you give us some sense about how to think about bookings in fiscal 2027 across the segments, specifically life sciences, how to think about bookings and backlog there? Thank you.

[Anne Cybulski, Interim CFO at ATS Corporation]

Good morning, Michael. I'll start and then Doug can chime in if you'd like. From a bookings perspective, we've characterized our life sciences funnel and more broadly, the remaining market verticals. Life sciences continues to remain strong. We have some areas of continued growth and including in the radiopharma space, and we expect that to continue. There are some, what I would call, moderations in timing in certain sub-markets within life sciences. We're pleased with the level of diversification we're seeing within that space. We'll continue to execute on our backlog as well as focus on those growth areas throughout the year.

[Michael Glen, Managing Director at Raymond James]

Do you think that backlog in the situation where we are seeing the moderation in the GLP-1 portion of the backlog, should we still think about growth in life science backlog over the coming year?

[Anne Cybulski, Interim CFO at ATS Corporation]

That's our goal. Of course, we came into fiscal 2026 with a very strong backlog as a result of some of those GLP-1 orders, as you noted. We've continued to work through that backlog. There's still some of that that we have to deliver on. In parallel, we've also seen an uptick in our radiopharma backlog. There's other areas of focus within that portfolio that we'll continue to drive to our expectation to exit the year with growth.

[Michael Glen, Managing Director at Raymond James]

Just one surrounding M&A. I am just trying to balance the commentary regarding you are doing some restructuring activity, and then there is also M&A. I am just trying to balance the two of those. Could we see M&A while some of this restructuring activity is ongoing, or would that be completed before we see M&A? Just trying to get a sense of some of the timing.

[Doug Wright, CEO at ATS Corporation]

Michael, this is Doug. The answer is they're really independent swim lanes for us. We look at restructuring as a capital deployment exercise, just like M&A. From that context, in terms of the ROI case that we look at, it's similar. The restructuring is related to markets that we don't believe fit our long-term profile. M&A is really about future positioning, either technology, aftermarket mix, or customer growth or regional growth. We really will do both of those simultaneously. They're not mutually exclusive.

[Michael Glen, Managing Director at Raymond James]

Okay. Thank you for taking the questions.

[Doug Wright, CEO at ATS Corporation]

You're welcome.

[Operator]

Your next question comes from Max Sytchev with National Bank Financial. Your line is open.

[Max Sytchev, Managing Director at National Bank Financial]

Hi, good morning, Doug and Anne.

[Anne Cybulski, Interim CFO at ATS Corporation]

Morning, Max.

[Max Sytchev, Managing Director at National Bank Financial]

The first question I had maybe for Doug. Good morning, Anne. In terms of the capital efficiency language, can you maybe talk about the biggest levers that you can see contributing to those improved metrics? Thank you.

[Doug Wright, CEO at ATS Corporation]

Yes. Well, I think it's broadly about, one, our margin expansion journey. Obviously, that's a big part of the return on investment equation. Within the asset base, I think the company has a very good track record, and we've demonstrated good results in working capital management. Now we're balancing that with sort of reviewing the, let's say the asset efficiency that's not working capital related. That would be things like return on fixed assets, how we look at our ROI of internal investments. We really will be driving both of those simultaneously for an improved capital efficiency result.

[Max Sytchev, Managing Director at National Bank Financial]

Okay. That's super helpful. Another question I had was in the commentary around the lab equipment space and go-to-market strategy, et cetera. I was wondering, do you mind maybe talking about the industry trends that are impacting that business kind of in general versus maybe some of ATS specifics? I'm just trying to see if there is a bit of a dislocation from that perspective or it's more market related. Thank you.

[Doug Wright, CEO at ATS Corporation]

It's primarily market forces. We operate in a lot of specialized sort of high consequence markets. The nature of that is that when there's a regulatory shift or a budgeting priority change by, let's say, national labs or specific large customers, there's always a bit of risk there in those businesses in the short term. Over the long-term horizon, we feel very comfortable with our positioning in the lab equipment space. It's a continued area of focus for our life sciences team, both as a vehicle for margin expansion as well as aftermarket development. I think you'll continue to see us focusing on the lab equipment segment going forward.

[Max Sytchev, Managing Director at National Bank Financial]

Okay. Thank you. One quick question, just in terms of M&A, I was wondering if in terms of the nuclear capability, if you think deepening sort of the supply chain expertise there could be potentially also vertical capital deployment or if you're looking elsewhere? Thank you.

[Doug Wright, CEO at ATS Corporation]

We are very excited about the potential in the nuclear segment, both in the traditional CANDU reactors where we have a very strong existing legacy position, as well as in the SMR categories, where we're involved with a number of customers. Should there be an opportunity for us to deploy capital in that space, it would certainly be an area that we would consider very strongly, particularly as it relates to extending our technology position or our service position. In some cases, looking at the geographic profiles, because nuclear is quite often more of a national priority in different places. If you're going to be in the U.S. market or the U.K. market, as an example, you have to have position there. It would absolutely be an area that will get equal treatment in the M&A discussion across the portfolio.

[Max Sytchev, Managing Director at National Bank Financial]

Okay. Thank you so much.

[Doug Wright, CEO at ATS Corporation]

You're welcome.

[Operator]

Your next question comes from Cherilyn Radbourne with TD Cowen. Your line is open.

[Cherilyn Radbourne, Managing Director at TD Cowen]

Thanks very much, and good morning. Could you give us a sense of where recurring revenue finished as a percentage of fiscal 2026 revenue and some of the initiatives underway to move that higher in fiscal 2027 and over time?

[Anne Cybulski, Interim CFO at ATS Corporation]

Sure, Cherilyn. I can start there, and then Doug can add on. What's sort of finished in range of our expectations, if I think about it in terms of around a third of our business falls into what we would categorize as recurring. There's faster turn businesses like our products businesses as well as aftermarket and spares, those types of things. Over time, given that we know that that part of the portfolio tends to be margin accretive, our goal would be to bump that % up and to make it a more meaningful part of the portfolio to support the growth and margin expansion trajectory.

[Doug Wright, CEO at ATS Corporation]

Yeah, Cherilyn, in terms of the initiatives that drive it, I'd classify it into two areas. One is around sort of focus and intention within our general management team. Everyone that runs a business at ATS has a service strategy, and some of them are strong, some of them are aspiring to get stronger. By having that focus and ownership, which through our organizational change that we announced last cycle, gives them all sort of what I would call a life cycle ownership of their customer. Part of it is that, and kind of to support that, there are a number of ABM tools that we have and continue to deploy to help our teams understand how to commercialize services.

[Doug Wright, CEO at ATS Corporation]

Services business have a little bit of a different cadence than systems businesses, so they require different types of contracts and quotations and a lot of the under workings of running a business. There's a lot of tools that we're deploying that are enabling that service. In fact, one of our key President's Kaizen events that we did in the late winter was specifically related to service growth in one of our large units, and that's something that a lot of our teams are aggressively working on. The second area is I believe strongly that our digital investments around things like digital twin, remote diagnostics, machine intelligence, and the digital frontier that we're very focused on right now are really also part of a broad service construct.

[Doug Wright, CEO at ATS Corporation]

I think you'll see ATS in the future talking more about physical AI and automation intelligence as key drivers to our recurring revenue stack.

[Cherilyn Radbourne, Managing Director at TD Cowen]

Okay. That's helpful. Can you speak to how much of the 50-75 basis points of expected margin improvement in fiscal 2027 is related primarily to the transportation reorganization? Does that suggest that there might be upside if a lot of it is coming from transportation?

[Anne Cybulski, Interim CFO at ATS Corporation]

Yeah, I can take that one, Cherilyn. What I think you saw in our disclosures today is an example of how we're thinking of managing the business going forward and the overall portfolio. The goal is to actively manage the businesses and improve our focus on growth and margin expansion over time. In this case, we have a multi-pronged plan to support that initial growth. There's multiple levers that we're using to drive margin improvement, offset by some of the investments in these key areas that we know that we need to make to support the longer-term growth, including in innovation.

[Anne Cybulski, Interim CFO at ATS Corporation]

While some of the 50 to 75 basis points is part of the transportation reorg, more broadly, we expected to continue to pull those other levers, including services being integrated into the businesses, and more focus on operational improvements, including through our ABM. The ABM has a powerful set of tools, and what's important, just to tag on to Doug's commentary around focus and intention, is really making sure that our business leaders are positioned to use the right tools in their businesses at the right time. That's a bit of a long answer, but it's really a growth trajectory that we're trying to drive.

[Anne Cybulski, Interim CFO at ATS Corporation]

With the actions we took today with transportation, that's an example of how we're intending to manage the portfolio.

[Cherilyn Radbourne, Managing Director at TD Cowen]

That's my two. Thank you.

[Operator]

Your next question comes from Jonathan Goldman with Scotiabank. Your line is open.

[Jonathan Goldman, Analyst at Scotiabank]

Hey, good morning, team, and thanks for taking my questions. Maybe just a housekeeping one to start. I know it's a small item, but the full-year revenue guidepost for modest growth, is that gross or net with the transportation headwind?

[Anne Cybulski, Interim CFO at ATS Corporation]

That's gross.

[Jonathan Goldman, Analyst at Scotiabank]

Okay, perfect. How should we think about or maybe frame up that growth rate, the modest growth, relative to your end markets?

[Anne Cybulski, Interim CFO at ATS Corporation]

Sorry, Jonathan, let me just make sure that I clarify your previous question. The modest growth is inclusive of the step-down in transportation revenues, just so I'm clear. Sorry, can you ask your second question again?

[Jonathan Goldman, Analyst at Scotiabank]

Yeah. The modest growth guide for this year, how does that frame up or correspond to the growth rates of your end markets?

[Anne Cybulski, Interim CFO at ATS Corporation]

Yeah. The way that I'm thinking about it is really the, call it moderation relative to our previous performance, is primarily timing related. Outside of that step-down in transportation, our fiscal 2027 guide is really about timing, program normalization, including in life sciences, as opposed to any change in our long-term view of the markets we serve. Just to reiterate something that we include in the disclosures, our goal remains to outpace the broader automation markets that we participate in. We feel that we're supported by good tailwinds in the markets that we serve.

[Jonathan Goldman, Analyst at Scotiabank]

That timing kind of reset, do you have visibility on when those programs actually will flow through?

[Doug Wright, CEO at ATS Corporation]

Jonathan, I think the way we understand that is through our view of our pipeline, which is really a reflection of where our customers are budgeting and planning their work. Across a majority of ATS's segments, those are strong pipelines and more diverse, particularly in life sciences. We've talked about this before, that we've really spent a lot of time over the last year diversifying our pipeline in things like radiopharma, mail order pharmacy, other med devices to diversify that sort of pipeline, where we sometimes have lumpiness in it based on different variables with things like GLP-1. I think we have very strong view of our pipeline. I would not characterize that as modest, clearly when we're dealing with the scale of the systems that we're deploying, there's always a certain amount of lumpiness in the execution.

[Doug Wright, CEO at ATS Corporation]

We'll have a little bit of sort of volatility in the quarters for revenue, but it's not an indication that our markets are softening at all. In fact, I would say that there's really no real drama in any of our end markets at this stage. There is a bit of modestness in the revenue in the near term simply because of the timing of various large orders.

[Jonathan Goldman, Analyst at Scotiabank]

Okay. Got it. That's useful color. I guess maybe one more on the working cap. Really strong performance this quarter. Working cap efficiency 12%, I think below your target of 15%. Did notice a large decline in accounts receivable. I just want to know if there's anything unusual in the quarter. How should we think about the investment rate this year?

[Anne Cybulski, Interim CFO at ATS Corporation]

We're pretty pleased with the progress we've made there. As I said in my prepared remarks, sometimes we can get timing differences, especially on the custom integration part of the business based on when payments are received as we work through our billing cycle and in fact our execution on these programs. The goal is 15% or less over time, and especially with some of the product businesses that we've brought on, they tend to carry a higher working capital need. That level of performance in the quarter and going forward to stay below 15% is our expectation, and it's one that takes ongoing discipline and attention by our teams. No change to the goal, Jonathan.

[Jonathan Goldman, Analyst at Scotiabank]

Got it. Thanks for taking my questions. I'll get back in queue.

[Operator]

Your next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

[Analyst at Goldman Sachs]

Hey, this is Aanvi on for Joe. Good morning.

[Anne Cybulski, Interim CFO at ATS Corporation]

Morning.

[Analyst at Goldman Sachs]

I just wanted to follow up on what Jonathan was also asking about the 2027 guide. I wanted to spend a minute to understand the sequential decline in backlog in the context of still a positive book-to-bill. Specifically, how does this inform your 2027 revenue outlook? If you could maybe particularly specify your comments around the consumer products market and energy, because we realize those have been really strong for now four to five quarters.

[Anne Cybulski, Interim CFO at ATS Corporation]

Yeah. Obviously we track our backlog, we track our funnels, as Doug said. The strength of our funnels, we feel good about. Coming into this year, we had a healthy backlog that we were working off of and continue to drive the growth going forward. In nuclear or energy, which is primarily nuclear work, that was our strongest growth end market vertical in the year. It's a relatively smaller portion of our business, but it's one that's strategically important to us. Some of that, we may see some timing factors in the order booking cycle, but we're working off of a strong backlog for that part of the business as we work through the refurbishment work that the team is executing on. Over time, we'll continue to deliver services and build out our SMR relationships and capabilities.

[Anne Cybulski, Interim CFO at ATS Corporation]

That's a longer-term play for us, but one that we're excited about. Consumer products, again, there's a number of different things in that backlog, and yes, we have seen good performance in that space. We characterize that as something that does tend to be a little bit more niche-y or subject to end consumer buying decisions. We've been happy with the performance of that part of the business during the year, coming from a few different parts of our portfolio, actually.

[Analyst at Goldman Sachs]

Got it. That's helpful. Maybe just my follow-up on the cash flow. It was good to see that bump in free cash flow this quarter, and now you've had six quarters of positive growth on that front. I recognize that it has been an overhang on the stock previously. If you could touch upon the main drivers on that and how we should think of FCF conversion in a normal environment, that would help.

[Anne Cybulski, Interim CFO at ATS Corporation]

Yeah, we have a longer-term goal that we've stated around free cash flow. We're happy with the performance in the year. It is an improvement. More predictability and normalization of that in the future is something that we're focused on through the commentary we provided around how do we drive overall capital efficiency and make sure that we're, in all of the areas, all of the levers that we have available to us, that we're operating efficiently in that regard. It'll continue to be an area of focus for us in terms of how we think about our investment decisions, both at the corporate level, also within our businesses.

[Doug Wright, CEO at ATS Corporation]

I could only add that working capital is a high priority within our operating rhythm with our businesses. We look at working capital with the same level of intensity we look at gross margin or SG&A percentage in each business as we go through their operating reviews. We incentivize around working capital performance. It's an intense part of our management system to have our leaders accountable for working capital. It's not a finance function, it's a general management function, it's a commercial leader function, it's a factory leader function. It's part of our operating rhythm.

[Doug Wright, CEO at ATS Corporation]

I know as a lean practitioner that working capital processes are actually a really strong signal for process acumen, because it's simply harder to move the needle on working capital than it is on other things because it takes longer and there's lots of third parties involved, suppliers or customers. I think it's a real hallmark of ATS' operating performance is working capital, and I think you'll see us continue to be highly focused on that.

[Analyst at Goldman Sachs]

Thanks. I'll hand it back.

[Operator]

Once again, if you have a question, it is star one on your telephone keypad. Your next question comes from Justin Keywood with Stifel. Your line is open.

[Justin Keywood, Managing Director at Stifel]

Thank you. Good morning. As a follow-up to the auto-injector opportunity as it relates to GLP-1, but also other applications. This sub-segment was described as being 20% of backlog or revenue of the life sciences segment last year. Are we able to get an update of where that is today and expectations in fiscal 2027?

[Anne Cybulski, Interim CFO at ATS Corporation]

I can speak to the numbers and Doug can speak to the market, Justin. There's still auto-injector work in our backlog. In the year, it came in where we expected it to be. Obviously, as we had executed on the work, it's come below what we had talked about before, which I think we said was in the, what you said, at 20% of LS, life sciences backlog and 10% of overall. It's ticked down below that, but that's sort of normal moderation and as we work through the capacity build-out from last year's order bookings. Of course, we've seen some offset from the uptick in our diversified radiopharma bookings from another part of our business. Over time, we still see opportunity in that market and I'll pass to Doug and he can comment on the market overall.

[Doug Wright, CEO at ATS Corporation]

Yeah, I think Jonathan, in the long term, we believe that auto-injectors for GLP-1s and other therapies is still a growth market. When customers are making very large investment decisions, it comes with a bit of lumpiness in our backlog. The real exciting part of the auto-injector market is actually the science. The number of trials that are underway for other types of products or therapies for cardiovascular, autoimmune, and neurological indications. I think as a provider to the life sciences industry, we're real proud of our position in helping bring these therapies to market. Obviously when we're dealing with science, there's a certain amount of volatility in the approvals through the clinical trials and the market ramps.

[Doug Wright, CEO at ATS Corporation]

We're pretty confident that auto-injectors are going to be a delivery device for the long term, recognizing that there's a bit of lumpiness. We think it's long-term going to be a great position for ATS.

[Justin Keywood, Managing Director at Stifel]

That's very helpful. Thank you. On capital allocation, what type of multiples are in the area for the private companies versus public peers that we see are continuing to trend much higher? Is there an ability for ATS to acquire at or below its current multiple?

[Doug Wright, CEO at ATS Corporation]

Well, we certainly pay attention to the multiples that we pay. Obviously from a value creation standpoint, the math is pretty straightforward. I would say to answer your question, Justin, we see valuations across the spectrum. There are some opportunities that we can acquire at below our current multiple, and there are others that we aspire to that have a higher multiple. Really the lens that we use is really can we make the business better? Whatever price we pay, we have to make sure we get a return on capital. I would say as we look at our pipeline, I think there's a pretty broad rainbow of valuations that we see. It's very esoteric, depending on the scale of the company, what region it's in, the specific mix that it has, how it's performing, et cetera.

[Doug Wright, CEO at ATS Corporation]

We have a very disciplined way that we look at value creation, and we wouldn't exclude or prioritize any specific assets based exclusively on the multiple arbitrage. We look at it quite holistically. We could do it either way.

[Justin Keywood, Managing Director at Stifel]

That's helpful. Is there a target ROIC for potential acquisitions?

[Doug Wright, CEO at ATS Corporation]

Yes. Greater than our cost of capital in the three-plus year horizon. Obviously internally as we're comparing alternatives, higher is better, but we have a threshold that our investors, our board holds us accountable for. It's a pretty traditional and conservative approach to we have to exceed our cost of capital, and then if there are competing ideas for our capital, then we obviously pick the one that has the higher one.

[Justin Keywood, Managing Director at Stifel]

Thank you very much.

[Doug Wright, CEO at ATS Corporation]

You're welcome.

[Operator]

This concludes the question and answer session. I'll turn the call to Doug Wright, Chief Executive Officer, for closing remarks.

[Doug Wright, CEO at ATS Corporation]

Thank you, operator, and thank you everyone for joining us today. We look forward to speaking to you on our Q1 call in August.

[Operator]

This concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Anne Cybulski, Interim CFO
• David Ocampo, Head of Investor Relations
• Doug Wright, CEO

Analysts

• Cherilyn Radbourne, Managing Director at TD Cowen
• Jonathan Goldman, Analyst at Scotiabank
• Justin Keywood, Managing Director at Stifel
• Max Sytchev, Managing Director at National Bank Financial
• Michael Glen, Managing Director at Raymond James
• Analyst at Goldman Sachs